Naturally, to the extent the AMT applies to the specific segment of taxpayers to whom it was initially addressed, it is serves a beneficial purpose; on the other hand, that benefit must be considered against the unintended consequences and unfairness of its application to taxpayers completely outside the ranks of the very wealthy, particularly at the lower end of that income category. Undesirable Consequences: The first major potential problem with the AMT is that it does not incorporate inflation at all; as a result, it applies to more and more taxpayers every year despite the fact that their wealth actually remains unchanged during that time. This is particularly important in times of economic recession, especially where income increases fail to keep pace with rising inflation. Whereas the AMT applied to a fewer than 200 households when first implemented in 1970, it currently affects as many as 15% of households earning as little as $75,000 annually (Leiserson 2008).

Because the AMT criteria calculate capital gains on an annual basis instead of a multiple-year basis, it effectively prohibits any deductions associated with losses carried forward from previous years. Similarly, it penalizes taxpayers whose annual earnings fall steadily between the lowest threshold and the cutoff of approximately $400,000, while exempting...

More importantly, it does not apply to some taxpayers who are much closer in actual wealth to the very taxpayers whose tax liability restructuring generated the need for the AMT in the first place: specifically, the truly wealthy who earn many times the $400,000 cutoff.
One of the most unfair consequences of the AMT is that it invalidates the foreign tax credit. As a result, millions of Americans living abroad meet the criteria for AMT liability by virtue of changes in the foreign currency exchange rate and are actually subject to double taxation in effect (CBO 2004). Conclusion:

The Alternative Minimum Tax made perfect sense in principle at the time of its inception. Since 1986, it has increasingly become a burden on taxpayers whose income and wealth is nowhere near that of the taxpayers whose tax shelters suggested the need for reform. Further reform is necessary to address the unintended consequences, especially in an economic climate where many affected taxpayers are already struggling.

References

Congressional Budget Office. (2004). Revenue and Tax Policy Brief: Alternative Minimum Tax.

Leiserson, G. (2008). The Individual Alternative Minimum Tax: Historical Data and Projections. "http:…